Slow growth ought to boost EU constitution in France

SINCE the European Union’s well-being is currently determined by the state of opinion polls in France ahead of the constitutional referendum, this has been a bad week.

European Voice

4/6/05, 5:00 PM CET

Updated 4/12/14, 11:19 AM CET

While the French government was busy trying to prevent the President of the European Commission, José Manuel Barroso, from appearing on public TV, fearing that his declarations would further lower support for the constitution, the ‘Yes’ campaign received bad news — or bad figures — from the Commission itself.

The Commission trimmed back its 2005 growth forecast for the eurozone to 1.6% (a slowdown from the already modest 2% growth it had previously forecast).

The poor economic news is likely to undermine the French government’s efforts to win popular approval for the constitution in the 29 May referendum. The indistinct feeling that Europe is not living up to the expectations of its citizens is in danger of being exacerbated by data showing that the EU’s member states are once again cutting back their expectations.

The main reasons for the eurozone’s sluggish growth are the high oil price and weak dollar. But the underlying problem is that Europe is badly equipped and has so far been unable to develop a strong internal dynamic that could protect it from such external shocks.

In the middle of a confused debate about the EU constitution in France, the message sent by the revised growth predictions is that Europe suffers from poor co-ordination of economic policy and in particular from member states’ failure to implement reforms.

The sluggish growth figures are likely to be seen as further evidence of failure by Jean-Pierre Raffarin’s government to improve the lot of the French people.

But the broader picture of the economic situation in the EU25 sends a message which should boost support for the EU constitution in France.

Enlargement of the Union to include ten new member states is something to which the French people are not yet reconciled and has contributed to reducing support for the constitution. But it has been beneficial for the EU’s general economic outlook. The EU has a new motor of growth: the new member states, which are faring far better than the large old member states.

France will grow by 2% this year, according to the Commission’s estimations, and Germany by 0.8% but Latvia will grow by 7.2%, Lithuania by 6.4% and Poland and the Czech Republic by 4.0%.

The new member states also outshine the old ones (in particular France and Germany) where budget deficits are concerned. Estonia’s deficit is forecast at 0.9% of gross domestic product (GDP) this year, Latvia’s at 1.6%, Lithuania’s at 2.4% and Slovenia’s at 2.2%.

By comparison, France, Germany, Greece, Italy and Portugal are struggling to bring their deficits within the limit of 3% of GDP.

These figures raise question marks over the economic policies pursued by the eurozone’s large member states and about the diligence of their reforms. They indicate that the EU’s political heavyweights, including France, have lessons to learn from the smaller new member states or from the older Nordic countries, which manage their economies better.

Another interesting message, which should perhaps enter the constitution debate in France, is that the services sector is growing faster than others, including manufacturing. A survey published this week showed that the healthy growth in services is making up for the weak growth – or even recession – in manufacturing.

Since the controversy over the liberalisation of services plays such an important role in France’s debate on the EU constitution, its leaders should seize this opportunity to convince their citizens that services is the sector that is most likely to drive growth and create jobs. The French leaders should argue for a careful liberalisation of services, instead of trying to win cheap political capital by attacking the Commission for putting forward such plans.

In principle, this week brought bad news for France. This is why it should enhance support for the EU constitution among the French.

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